Saturday, June 13, 2015

Eminent economists have lined up to slam George Osborne's plans for a 'balanced budget' law, saying that it ignores "basic economics" and warning that the imposition of such restrictions on a modern economy risks triggering a liquidity crisis.

Signatories of the letter published in yesterday's Guardian include Ha-Joon Chang, Thomas Piketty, David Blanchflower and Jared Bernstein, as well as professors of economics at Oxford University, the London School of Economics, the University of London and Warwick University among others.

Meanwhile, Nobel Prize-winning economist Paul Krugman, writing in the New York Times yesterday, attacked the British government's austerity policies and shameful rhetoric in no uncertain terms.

The ultimate example of a seriously bad idea is the determination, in the teeth of all the evidence, to declare government spending that helps the less fortunate a crucial cause of our economic problems.

Astonishingly, some in the Labour party believe that the best way forward for the party is to join the Tories in economic Bizarro World – capitulating to the dominant narrative that Krugman calls out for its absurdity. Writing on the ironically-named blog Labour Uncut, Samuel Dale argues that Labour should support Osborne's economically illiterate 'balanced budget' proposal.

Dale's argument is that the economics don't matter: the politics demand that Labour admit defeat on their economic record and move on. It's not an irrational argument, and based on the pronouncements made by all three of the front-runners for this summer's leadership election it's one that the party is somewhat taken by. It's also dead wrong.

Krugman:

Mr. Osborne sounds very serious [about his 'balanced budget' proposal], and, if history is any guide, the Labour Party won’t make any effective counterarguments.

If we are to escape from the Bizarro World of Osbornomics – one that is completely at odds with economic reality as viewed by most serious economists – Labour have to confront the myths and must not capitulate to that dominant narrative. It is extraordinary that the only leadership candidate who has given any indication of being prepared to do so is Jeremy Corbyn.

Regardless of anything else, this is why Corbyn must be on the ballot paper when nominations close on Monday.

Contributors

About the authors

Ian: Occasional political blogger, motivated to restart by the outcome of the 2015 election and the need for more reasoned debate and less polarisation. Believer in egalitarianism and in personal freedom. I don't call myself a libertarian any more these days.

Newcastle - Oxford - London - Macclesfield

Glenn:First blogged about student protests in 2010, now back in search of a platform for his left-wing views. Supports voting reform and the NHS. Against austerity and TTIP.